Apple: The Ethics of Spending $100 Billion

What’s the best thing to do with a hundred billion dollars? Apple — the world’s richest company — gave its answer to just that question, when it announced yesterday how it will spend some of the massive cash reserve the company has accumulated.

Of course, spending the whole $100 billion was never on the agenda. The company needs to keep a good chunk of that money on-hand, for various purposes. Then there’s the fact that a big chunk of it is currently held by foreign subsidiaries, and bringing it back to the US to spend it would require Apple to pay hefty repatriation taxes. But any way you slice it, Apple has a big chunk of cash to spend, and so its Board faces some choices.

In the abstract, there are lots of things one could do with that much money. Financial analysts had rightly predicted that Apple company would decide to pay out a dividend (for the first time since 1995). Some were predicting bolder moves, like buying Twitter (which would use up a mere $12 billion). But what could Apple have done with that much money, aside from narrow strategic moves?

The money could have, in principle, been spent on various charitable projects. That amount of money could also do a lot towards helping developing countries combat and adapt to climate change. Or it could revolutionize the American education system. Closer to home, the company could spend a bunch on improving working conditions at its factories in China, conditions for which the company has been widely criticized. All of these, and many more, are (or rather were) among the possibilities.

But business ethics isn’t abstract; Apple’s Board faced a concrete question. And the Board has ethical and legal obligations to shareholders. Those aren’t its only obligations, but once workers are paid, warranties are honoured, expenses are covered, and relevant regulations are adhered to, the main remaining obligation is to shareholders.

Now, there’s a significant strain of thought that says that a company’s managers (and its Board) are not there just to serve the interests of shareholders, but also to carry out shareholders’ obligations. So, if you believe that Apple shareholders have an obligation to fight climate change or to promote education or to improve conditions for workers, then maybe it makes sense to think that the company ought to help shareholders to act on that obligation. But keep in mind that Apple’s shareholders are a rather amorphous group. Shares in corporations change hands incredibly frequently, and the interests and obligations of shareholders vary significantly, so a Board ‘represents’ shareholders (or acts as their agent) only in a rather abstract sense.

The alternative, of course, is for Apple’s Board to give itself some leeway, forget about what shareholders’ collective obligations might be, and go back to thinking abstractly about what to do with that big pile of cash. They can simply decide whether the shareholders’ financial interests outweigh their collective obligation to do some good with that money, and simply decide which of the various worthy causes it should go to. But of course, lots of people are rightly uncomfortable with the idea of well-heeled corporate boards arrogating to themselves that kind of power. The question for discussion, then, is this. Which is the greater evil? For corporations not to step up to the plate and contribute to social objectives, or for corporate leaders to presume to spend vast sums of money as if it were their own?

4 comments so far

  1. andreabcreative on

    100 Billion Dollars.

    At first blush, I think most people or companies would say, “I’d like to have the problem of trying to spend $100 billion dollars.” But after careful thought, I’m wondering if any person or company would really like to have this on their agenda. As Spiderman has taught us: “With great power comes great responsibility” and $100 billion dollars is a great responsibility indeed.

    I think shareholders should provide options and opinions to Apple regarding their spending. After all, “there exists a ‘set of principles regarding economic morality to which contractors would agree’. These universal principles can be identified by a ‘convergence of religious, cultural, and philosophical beliefs around certain core principles’” (Husted et al., 2006, pg. 4). And we all know the good that a large amount of money could do to benefit the community and the world at large.

    I think Apple does have a responsibility with this money and it’s usage. Because Apple is a leader in successful business practices and fruitful product implementation. It would also make sense for them to be a successful market leader in the Corporate Social Responsibility realm. “Corporate social responsibility is defined as the firm’s obligation to respond to the externalities created by market action” (Husted et al., 2006, pg. 3).

    And as a company that reaches the globe, they have a larger impact to achieve than, say, a local business. “The key difference between global and local CSR is the community that demands it. A local community is a self-defined, self-circumscribed group of people who interact in the context of shared tasks, values or goals and who are capable of establishing norms of ethical behavior for themselves. In contrast, hypernorms or fundamental principles about moral rights and obligations reflect a set of standards to which all societies can be held. Thus, local CSR deals with the firm’s obligations based on the standards of the local community, whereas global CSR deals with the firm’s obligations based on those standards to which all societies can be held” (Husted et al., 2006, pg. 4).

    I only hope that Apple chooses wisely, because their decision could really impact us all.

  2. Stephanie Weddell on

    Dr. MacDonald,
    Thank you for this very compelling post. You present some very important questions in regard to corporate social responsibility and the conflicting obligations that corporations face. I am a graduate student studying communication and am currently discussing these topics in an ethics class.
    You mention that some scholars feel that Apple’s Board may have an obligation to carry out the shareholders’ obligation—that is to act responsible on their behalf. I personally feel that this is a dangerous idea. This concept takes control from the people and places it in the hands of a few powerful corporations. Additionally, I find it interesting that there is no discussion concerning Apple’s stakeholders. Contemporary discussion on corporate social responsibility has begun to focus on corporate responsibility to stakeholders, not solely shareholders (Freeman, 1984; Post, Preston, & Sachs, 2002 as cited by Christensen, Morsing, & Thyssen, 2011).
    In my opinion, Apple’s decision was a poor one that provides a prime example of corporate greed. I feel that a better decision would have been to improve Apple’s relationship with its suppliers by helping to improve the working conditions in China’s factories. In this way, Apple’s Board is considering its broader range of influence over stakeholders without making moral decisions on behalf of its shareholders.
    Thank you again for this post!
    Christensen, L. T., Morsing, M., & Thyssen, O. (2011). The polyphony of corporate social responsibility In G. Cheney, S. May & D. Munshi (Eds.), The Handbook of Communication Ethics (pp. 457-474). New York: Routledge.
    Stephanie Weddell
    Drury University Graduate Student

  3. Suren on

    It’s primarily the responsibility of the Board of Directors of the company to decide what Apple should do with the funds of the company; a major part of which should, of course, be reinvested – for expansion, diversification, R&D and acquisitions. A part of the surplus funds should go into the pockets of the shareholders as dividends. Finally, the company can increase it’s annual spend on CSR.

    • Chris MacDonald on

      Suren:

      OK, but why? Having a point of view is fine, but it’s more useful if you can provide a reason for that point of view.

      Chris.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: